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Iowa Farmland. Realtors Land Institute December 6, 2004 Michael Duffy. Outline. Background Land Values Rate of Return Expectations Land Ownership Trends and Implications Land Rents and Rental Arrangements Costs of Production Are we set up for another fall?. Iowa Farmland.

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iowa farmland

Iowa Farmland

Realtors Land Institute

December 6, 2004

Michael Duffy

outline
Outline
  • Background
  • Land Values
    • Rate of Return
    • Expectations
  • Land Ownership Trends and Implications
  • Land Rents and Rental Arrangements
  • Costs of Production
  • Are we set up for another fall?
iowa farmland4
Iowa Farmland
  • 68 percent of land is harvested
  • 62 percent of the land is in corn or soybeans
  • 68 percent of the land in farms is in corn or soybeans
  • Iowa farmland valued at approximately $73B
  • 91 percent of land is in farms
percent of farmland in corn soybeans

Lyon

Osceola

Dickinson

Emmet

Winnebago

Worth

Mitchell

Howard

87%

91%

88%

90%

92%

90%

88%

79%

Winneshiek

Allamakee

58%

35%

Kossuth

94%

Sioux

OBrien

Clay

Palo Alto

Hancock

Cerro Gordo

Floyd

Chickasaw

89%

91%

88%

92%

95%

92%

88%

83%

Fayette

Clayton

77%

53%

Humboldt

Bremer

Plymouth

Cherokee

Buena Vista

Pocahontas

Wright

Franklin

Butler

95%

87%

83%

82%

92%

95%

95%

92%

87%

Dubuque

Black Hawk

Buchanan

Delaware

Webster

49%

91%

88%

76%

Woodbury

Ida

Sac

Calhoun

Hamilton

Hardin

Grundy

93%

77%

86%

92%

94%

93%

89%

93%

Jackson

39%

Jones

Tama

Benton

Linn

71%

Monona

Crawford

Carroll

Greene

Boone

Story

Marshall

79%

83%

76%

82%

82%

87%

90%

88%

89%

86%

Clinton

82%

Cedar

83%

Harrison

Jasper

Poweshiek

Iowa

Shelby

Audubon

Guthrie

Dallas

Polk

Johnson

82%

87%

79%

68%

84%

78%

70%

65%

Scott

84%

70%

89%

Muscatine

79%

Warren

Keokuk

Washington

Pottawattamie

Cass

Adair

Madison

Marion

Mahaska

84%

46%

49%

59%

72%

63%

72%

74%

60%

Louisa

78%

Mills

Montgomery

Adams

Clarke

Lucas

Monroe

Wapello

Jefferson

Union

Henry

87%

54%

58%

74%

53%

40%

25%

22%

26%

70%

Des Moines

20% - 40%

81%

Van Buren

Davis

Fremont

Page

Wayne

Appanoose

Taylor

Ringgold

Decatur

40% - 60%

42%

86%

23%

33%

Lee

68%

49%

29%

24%

37%

60% - 80%

65%

80% - 100%

Percent of Farmland* in Corn, Soybeans

*Does not include land in building sites or woodlands.

percent of farmland idled in cover crops unharvested failed or abandoned

Lyon

Osceola

Dickinson

Emmet

Winnebago

Worth

Mitchell

Howard

0.9%

4.2%

3.3%

2.2%

4.8%

4.4%

3.7%

7.7%

Winneshiek

Allamakee

9.5%

12.3%

Kossuth

1.9%

Sioux

OBrien

Clay

Palo Alto

Hancock

Cerro Gordo

Floyd

Chickasaw

2.1%

1.8%

3.1%

3.7%

2.4%

2.8%

5.0%

4.4%

Fayette

Clayton

5.7%

13.5%

Humboldt

Bremer

Plymouth

Cherokee

Buena Vista

Pocahontas

Wright

Franklin

Butler

2.0%

4.1%

3.3%

1.5%

2.0%

1.9%

2.5%

2.4%

4.6%

Dubuque

Black Hawk

Buchanan

Delaware

Webster

9.1%

3.1%

2.4%

5.2%

Woodbury

Ida

Sac

Calhoun

Hamilton

Hardin

Grundy

3.2%

6.9%

3.9%

1.7%

2.1%

3.3%

2.6%

2.5%

Jackson

14.0%

Jones

Tama

Benton

Linn

6.2%

Monona

Crawford

Carroll

Greene

Boone

Story

Marshall

5.9%

4.6%

5.6%

3.8%

3.4%

2.9%

2.5%

3.1%

4.5%

4.4%

Clinton

6.1%

Cedar

4.4%

Harrison

Iowa

Shelby

Audubon

Guthrie

Dallas

Jasper

Poweshiek

Polk

Johnson

4.0%

3.4%

7.9%

7.7%

3.3%

5.2%

8.5%

12.6%

Scott

3.9%

8.3%

2.5%

Muscatine

7.0%

Pottawattamie

Madison

Warren

Marion

Mahaska

Keokuk

Washington

Cass

Adair

11.1%

11.0%

14.5%

11.7%

4.1%

6.3%

8.1%

7.9%

11.4%

Louisa

9.0%

Jefferson

Mills

Montgomery

Adams

Union

Clarke

Lucas

Monroe

Wapello

Henry

3.6%

7.1%

10.6%

13.3%

15.4%

10.6%

12.3%

14.4%

10.3%

10.2%

Des Moines

4.9%

Van Buren

Fremont

Appanoose

Davis

Page

Taylor

Ringgold

Decatur

Wayne

1% - 4%

13.4%

13.7%

4.5%

7.6%

15.2%

13.4%

17.3%

14.8%

13.8%

Lee

4% - 8%

8.4%

8% - 11%

11% - 18%

Percent of Farmland* Idled, in Cover Crops, Unharvested, Failed, or Abandoned

*Does not include land in building sites or woodlands.

percent of farmland in hay and oats

Lyon

Osceola

Dickinson

Emmet

Winnebago

Worth

Mitchell

Howard

4.3%

2.5%

3.1%

1.6%

1.5%

2.2%

Winneshiek

Allamakee

3.6%

6.4%

16.6%

18.3%

Kossuth

1.5%

Sioux

OBrien

Clay

Palo Alto

Hancock

Cerro Gordo

Floyd

Chickasaw

3.7%

2.3%

2.7%

1.4%

1.4%

1.6%

3.1%

5.5%

Fayette

Clayton

7.9%

15.0%

Humboldt

Bremer

Plymouth

Cherokee

Buena Vista

Pocahontas

Wright

Franklin

Butler

0.9%

4.8%

3.7%

3.3%

1.4%

1.0%

0.7%

1.9%

3.0%

Dubuque

Buchanan

Delaware

Black Hawk

Webster

20.7%

2.7%

4.0%

9.6%

Woodbury

Ida

Sac

Calhoun

Hamilton

Hardin

Grundy

1.1%

3.9%

3.5%

2.6%

1.0%

1.0%

1.9%

1.2%

Jackson

14.8%

Jones

Tama

Benton

Linn

7.7%

Monona

Crawford

Boone

Carroll

Greene

Story

Marshall

4.9%

4.2%

6.2%

2.8%

4.3%

3.4%

2.3%

2.9%

2.1%

2.7%

Clinton

4.8%

Cedar

3.9%

Iowa

Harrison

Shelby

Audubon

Guthrie

Dallas

Jasper

Poweshiek

Polk

Johnson

2.8%

3.6%

4.7%

5.8%

3.1%

5.3%

8.1%

6.6%

Scott

4.5%

10.0%

3.4%

Muscatine

4.8%

Warren

Keokuk

Washington

Pottawattamie

Cass

Adair

Madison

Marion

Mahaska

3.6%

11.0%

11.0%

8.5%

4.6%

5.2%

5.3%

6.1%

10.1%

Louisa

3.9%

Mills

Montgomery

Adams

Union

Clarke

Lucas

Monroe

Wapello

Jefferson

Henry

2.9%

4.9%

18.0%

16.5%

10.5%

9.8%

8.0%

13.7%

16.7%

5.6%

Des Moines

3.3%

1% - 4%

Van Buren

Davis

Fremont

Page

Decatur

Wayne

Appanoose

Taylor

Ringgold

17.7%

14.2%

4% - 9%

2.0%

6.1%

15.1%

20.4%

Lee

8.4%

15.9%

15.1%

7.8%

10% - 12%

14% - 21%

Percent of Farmland* in Hay and Oats

*Does not include land in building sites or woodlands.

percent of farmland in pasture

Lyon

Osceola

Dickinson

Emmet

Winnebago

Worth

Mitchell

Howard

8.2%

1.9%

5.1%

5.9%

1.7%

3.0%

Winneshiek

Allamakee

4.7%

7.0%

16.1%

34.8%

Kossuth

2.7%

Sioux

OBrien

Clay

Palo Alto

Hancock

Cerro Gordo

Floyd

Chickasaw

5.2%

5.3%

6.0%

2.9%

1.6%

3.3%

3.7%

6.9%

Fayette

Clayton

9.0%

18.5%

Humboldt

Bremer

Plymouth

Cherokee

Buena Vista

Pocahontas

Wright

Franklin

Butler

2.3%

4.0%

10.1%

13.3%

4.0%

2.4%

1.9%

3.4%

5.1%

Dubuque

Buchanan

Delaware

Black Hawk

Webster

21.1%

3.4%

5.3%

9.6%

Woodbury

Ida

Sac

Calhoun

Hamilton

Hardin

Grundy

3.2%

12.8%

6.8%

3.9%

3.2%

2.4%

6.2%

3.1%

Jackson

32.0%

Jones

Tama

Benton

Linn

15.2%

Monona

Crawford

Boone

Carroll

Greene

Story

Marshall

10.0%

7.7%

11.8%

11.9%

10.2%

6.3%

5.3%

6.5%

4.7%

7.1%

Clinton

7.6%

Cedar

8.9%

Iowa

Harrison

Shelby

Audubon

Guthrie

Dallas

Jasper

Poweshiek

Polk

Johnson

11.5%

6.4%

8.0%

18.7%

9.5%

11.3%

12.9%

16.0%

Scott

7.2%

12.0%

5.0%

Muscatine

9.3%

Warren

Keokuk

Washington

Pottawattamie

Cass

Adair

Madison

Marion

Mahaska

8.8%

35.0%

28.5%

21.0%

12.1%

17.5%

10.5%

13.8%

21.7%

Louisa

8.7%

Mills

Montgomery

Adams

Union

Clarke

Lucas

Monroe

Wapello

Jefferson

Henry

6.3%

13.5%

44.1%

46.7%

23.2%

18.3%

28.5%

35.6%

45.4%

13.9%

Des Moines

11.2%

2% - 5%

Van Buren

Davis

Fremont

Page

Decatur

Wayne

Appanoose

Taylor

Ringgold

5% - 15%

36.1%

30.4%

8.0%

18.7%

32.8%

43.6%

25.0%

40.9%

46.9%

Lee

18.9%

15% - 30%

30% - 47%

Percent of Farmland* in Pasture**

*Does not include land in building sites or woodlands.

**Includes both woodland and rangeland pasture.

percent of farmland in woodlands houses ponds roads and wasteland
Percent of Farmland in Woodlands, Houses, Ponds, Roads, and Wasteland

Lyon

Osceola

Dickinson

Emmet

Winnebago

Worth

Mitchell

Howard

5.4%

4.1%

3.9%

3.8%

5.6%

5.1%

Winneshiek

Allamakee

6.2%

8.6%

14.4%

30.2%

Kossuth

4.1%

Sioux

OBrien

Clay

Palo Alto

Hancock

Cerro Gordo

Floyd

Chickasaw

4.6%

4.8%

5.1%

4.3%

3.5%

4.2%

6.0%

7.3%

Fayette

Clayton

10.0%

22.0%

Humboldt

Bremer

Plymouth

Cherokee

Buena Vista

Pocahontas

Wright

Franklin

Butler

5.3%

7.3%

5.2%

5.7%

5.2%

4.4%

4.4%

5.3%

7.0%

Dubuque

Delaware

Black Hawk

Buchanan

Webster

15.2%

6.5%

6.2%

10.0%

Woodbury

Ida

Sac

Calhoun

Hamilton

Hardin

Grundy

5.9%

7.3%

5.8%

6.0%

4.4%

4.9%

5.4%

3.7%

Jackson

18.5%

Jones

Tama

Benton

Linn

11.3%

Monona

Crawford

Carroll

Greene

Boone

Story

Marshall

7.0%

6.8%

11.0%

9.1%

7.0%

6.3%

6.2%

8.5%

5.6%

6.3%

Clinton

7.5%

Cedar

8.3%

Harrison

Shelby

Audubon

Guthrie

Dallas

Jasper

Poweshiek

Iowa

Polk

Johnson

8.6%

5.0%

7.2%

9.5%

7.7%

7.6%

9.1%

12.4%

Scott

6.8%

10.0%

5.5%

Muscatine

10.9%

Washington

Pottawattamie

Cass

Madison

Warren

Marion

Mahaska

Keokuk

Adair

14.5%

13.8%

12.4%

10.2%

11.9%

11.0%

6.7%

6.0%

8.6%

Louisa

12.3%

Mills

Montgomery

Adams

Clarke

Lucas

Monroe

Wapello

Jefferson

Union

Henry

8.8%

16.2%

16.8%

7.6%

9.1%

11.0%

14.6%

21.0%

19.1%

15.2%

Des Moines

12.0%

Van Buren

Davis

Fremont

Page

Wayne

Appanoose

Taylor

Ringgold

Decatur

Lee

20.7%

9.1%

16.6%

16.3%

9.6%

11.5%

12.1%

16.0%

10.9%

18.2%

3.5% - 6.0%

6.0% - 10.0%

10.0% - 15.0%

15.0% - 31.0%

capitalization rate
Capitalization Rate
  • 2002 land taxes
  • $10 land management fee
  • ISU Extension Estimated Costs of Production, Land Values, and Cash Rents
  • Government payment data from Environmental Working Group
land compared to dow jones
Land Compared to Dow Jones
  • Yearly Dow Jones Industrial dividend reported by Dow Jones
  • USDA/Economic Research Service rent values
  • ISU Extension land values
  • Assume $1,000 invested with returns reinvested
  • Land tax is only ownership cost assumed
land expectations
Land Expectations
  • ISU survey released Dec. 14, 2004
  • Federal Reserve estimation;
    • 2% increase 3rd Quarter; 12% increase July to July
  • USDA/ERS estimate;
    • $2,200 per acre; 9.5% increase Jan. to Jan.
  • Chapter estimate;
    • 14.4% increase September to September
land ownership trends
Land Ownership Trends
  • Telephone survey conducted by ISU Statistical Laboratory
  • Data as of July 1 , 2002
  • 633 useable responses, 80% response
conclusions
Conclusions
  • Iowa farmland owners are aging and the trend will continue for the next several years
  • There will be a considerable amount of Iowa’s farmland change hands over the next few years. More than likely this land will be passed on to the next generation and not even enter the market.
  • There will continue to be an increase in the amount of land owned by people outside the state.
conclusions78
Conclusions
  • Land ownership patterns will change with fewer sole owners and more multiple owners
  • More land will be rented and cash rents will increase in prevalence
  • Second generation may have different views towards land
conclusions79
Conclusions
  • Less debt against the land
  • Different category of purchasers
  • Fewer contracts
  • Factors to watch
    • Government programs
    • Interest rates
    • Exchange rates
    • Deficit